"Bidding War" — it can be an intense and scary term for something that isn't actually a war at all. Rather, it's simply your homebuying strategy vs. competing strategies to win the home you want to call yours.
Today's market is competitive and bidding wars are not uncommon. In fact, in 2017, nearly one in four homes sold for more than asking price due to buyers out–bidding each other.
So, how do you "win" this war? There are different strategies that have proven effective over the years, some more challenging than others, but all worth consideration.
- Get Pre–Approved. By having a pre–approval letter from your lender, you're telling the seller that 1.) you're a serious buyer, and 2.) you've been pre–approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will most likely get dropped without one.
- Get Emotional. Break out your pen and write an emotional "Dear Seller, Pick Me" letter. This strategy has proven to be effective, increasing your odds in some markets by more than 50%. Emotions play a big role in "home sweet home" and your letter puts a live person, and a serious buyer, behind the transaction.
- Get Cash. In real estate, cash is undoubtedly king and an all–cash offer can more than double your chance of getting the home. This is because all–cash offers are far more streamlined with far fewer possibilities of falling through. However, this tactic is unrealistic for most families, so back to #1 and #2.
Because every local market and seller's situation is different, you'll want to rely on your real estate agent's professional advice. Also, be sure to visit My Home by Freddie Mac® to learn more about the homebuying process, from soup to nuts.